R&D Tax Incentive final design announced

The Government has announced the final design of the R&D Tax Incentive following extensive consultation with the innovation sector and businesses throughout the country.

The Government has committed to raising New Zealand’s research and development (R&D) expenditure to 2% of GDP over 10 years. To reach this target more businesses will need to increase their expenditure on R&D. This will be supported through an R&D Tax Incentive.

The key features of the R&D Tax Incentive include:

A credit rate of 15%

A $120 million cap on eligible expenditure

A minimum R&D expenditure threshold of $50,000 per year

A limited form of refunds for the first year of the scheme that will mirror the R&D tax-loss cash-out scheme run by Inland Revenue. A more comprehensive policy will be in place for the second year of the scheme

A definition of R&D that ensures the credit can be accessed more easily across all sectors, including the technology sector

The inclusion of State Owned Enterprises, industry research cooperatives, levy bodies, and minority-owned subsidiaries of select Crown entities.

R&D Growth Grants will be phased out with the introduction of the R&D Tax Incentive. Businesses with an active Growth Grant on 1 April 2019 can continue receiving their grant until 31 March 2021.

All of Callaghan Innovation’s other services and products, including R&D Project Grants and R&D Student Grants are not affected by this initiative.

To give Growth Grant recipients certainty in their operations, we have extended current contracts until 31 March 2021. MBIE and Callaghan Innovation will continue to work closely with Growth Grant holders to ensure a smooth transition, and assist those who want to move over to the tax incentive sooner to do so.